--Clyde Russell is a Reuters market analyst. The viewsexpressed are his own.--

By Clyde Russell

LAUNCESTON, Australia, March 6 (Reuters) - This year'scommodity rally has ended and magically restarted in just fivedays, and it's all because of China.

Commodity prices dropped on March 1, with London copper hitting a three-month low of $7,659.50 a tonne, onconcern that industrial production in China, the world's biggestbuyer of the industrial metal, was losing momentum.

This was because both the official and HSBC PurchasingManagers' Indexes fell to five-month and four-month lowsrespectively.

The gloomy feeling was amplified by Chinese authoritiessaying they will take steps to cool property prices, which wasinterpreted by the market as bearish for construction and, byimplication, both copper and iron ore demand.

However, by March 5, all was good again after China'soutgoing Premier Wen Jiabao announced record government spendingin order to boost consumer-led growth.

Even though China kept its 2013 economic growth target at7.5 percent, the same as last year's, the market interpretedWen's comments as positive for commodity demand, and Londoncopper rallied. It was trading at $7,766.75 a tonne in earlyAsian trade on Wednesday, up 1.4 percent from the March 1 low.

It was the same story with crude oil, with front-month Brentfutures dropping to the lowest this year on March 4,weighed down by China and concern over government spending cutsin the United States.

But once again, prices rallied on the positive news andBrent was at $111.61 a barrel on Wednesday, up 1.9 percent fromthe March 4 low of $109,58.

Of course, nothing fundamental about the Chinese economy haschanged in the past week and the story of a modest recovery fromlast year's slowing in growth remains intact.

It's also not unusual for markets to trade on the 24-hournews cycle and certainly some investors rely on the day-to-dayvolatility to make money.

But commodity prices would benefit from less of the instantanalysis that follows every twist and turn and relatively minorindicator out of China.

RECOVERY ON TRACK

Economic data and political announcements should be siftedfor their importance and analysed in terms of how they canpotentially change the prevailing consensus.

Certainly the two PMIs confirmed that the recovery remainson track, but unlike the boom after the 2008 global financialcrisis, it will be more measured.

The curbs on property have more potential to impact oncommodity markets, especially if they do result in a slackeningof construction.

But this is far from a definite, meaning that right now theoutlook for steel and iron ore demand isn't as assured as it wasearlier this year.

In fact, the real estate measures are just another reason tobe cautious on iron ore, given the steel-making ingredient'smassive rally from a three-year low hit last September.

Spot iron ore rallied 83 percent between itslow and the recent high of $158.90 a tonne reached on Feb. 20.

It has since declined 8.6 percent to $145.20 and probablyhas further to fall, given the softer demand growth possible inChina and expected supply additions in top producer Australiafrom the third-quarter onwards.

But overall the outlook for commodity demand in China is oneof steady growth, especially against the backdrop of increasingconsumer spending and the ongoing urbanisation, which should seeat least another 130 million people move permanently to urbanareas over the next decade.

What investors outside China have still to come to termswith is that the rates of growth in commodity demand are goingto slow, but instead of this being a "bad" thing, it's anecessary function of a maturing economy.

The key thing to remember is that there is still likely tobe growth in demand over the medium- and long-term and anyvolatility is likely short term in nature.

The next risk event comes with the February trade data dueMarch 8, with the possibility of some softer numbers oncommodity imports.

However, the numbers will have to be read together withJanuary's in order to get an accurate picture, given that theweek-long Lunar New Year was in February this year but inJanuary last year.

The February numbers would have to be exceptionally weak inorder to upset the view of steady growth in Chinese commoditydemand this year.